Why This Friday's Jobs Report Could Blow Past 300,000

It's hard making an accurate forecast for this Friday's jobs report but let's take a look at a way we can make a reasonable guess.

The weekly jobless claims have a strong correlation to the monthly non-farm payrolls report (actually, it's negative; check out the chart below). I took the four-week moving average and compared it to the last 36 months of data and here's what I got (I excluded May 2010 due to census hiring.)

My regression shows that when weekly jobless claims are 458,000, then the NFP for the month is zero.

For every 10,000 that jobless claims are below 458,000, there are 34,000 new jobs for that month. The r-square of the regression is 0.875.

The current four-week moving average is 354,000 so that translates to (oddly enough) 354,000 net new jobs for February. That's far more than the current consensus on Wall Street which is for a gain of 250,000. I should add that there's one more jobless claims report coming out tomorrow.